Lithuanian President Dalia Grybauskaite has signed a new law that will break the Gazprom gas monopoly's control over supplies and distribution in the country.

In doing so, it has become the first European Union country to begin implementing new regulations seen as a major test of the EU's determination to slow the Russian company's advance into Europe.

The Lithuanian bill is part of the EU's so-called Third Package of energy market liberalization, aimed at weakening the power of large monopolies by forcing them to "unbundle" distribution networks from production facilities.

Ironically, previous liberalization has helped Gazprom -- one of the world's largest monopolies, which supplies the European Union with a quarter of its gas -- snap up newly freed parts of the profitable "downstream" energy market, the utilities that deliver Russian energy supplies directly into the homes of its European customers.

The Kremlin has sought to split EU unity on energy policy by making lucrative deals with individual countries, part of what critics say is a drive to use Russia's vast energy supplies as a foreign policy tool.

Moscow has railed against the new EU liberalization, which threatens years of efforts to buy up European energy infrastructure, and is lobbying hard in Brussels for exemptions.

Prime Minister Vladimir Putin has called the proposed regulations "robbery" and "no better than terrorism" for creating barriers to investment by Gazprom.

The Russian gas monopoly, which provides all Lithuania's supplies, owns 37 percent of the country's main gas supplier, and has threatened to raise prices if it's forced to sell its stake.

Estonia may be next to enact liberalization laws later this year.

--Gregory Feifer

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